This is an amortized loan, because its payments contain: O Only the principal that must be repaid Both interest and principal O Only accrued interest The monthly payment in the loan here is influenced by 3 variables: the amount borrowed, the loan's interest rate, and the term. What is the na the relationship between each of these variables and the size of a loan's payment, everything else assumed to remain constant? • An increase in the amount borrowed will • An increase in the loan's interest rate will the size of the borrower's monthly payment. the size of the borrower's monthly payment. • An increase in the loan's term will the size of the borrower's monthly payment.
This is an amortized loan, because its payments contain: O Only the principal that must be repaid Both interest and principal O Only accrued interest The monthly payment in the loan here is influenced by 3 variables: the amount borrowed, the loan's interest rate, and the term. What is the na the relationship between each of these variables and the size of a loan's payment, everything else assumed to remain constant? • An increase in the amount borrowed will • An increase in the loan's interest rate will the size of the borrower's monthly payment. the size of the borrower's monthly payment. • An increase in the loan's term will the size of the borrower's monthly payment.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The total of the Interest column indicates the amount of interest expected to be paid over the life of the loan, and the sum of the Payment column
details the total paid ($161,430) to purchase your $145,750 home.
This is an amortized loan, because its payments contain:
O Only the principal that must be repaid
O Both interest and principal
O Only accrued interest
The monthly payment in the loan here is influenced by 3 variables: the amount borrowed, the loan's interest rate, and the term. What is the nature of
the relationship between each of these variables and the size of a loan's payment, everything else assumed to remain constant?
• An increase in the amount borrowed will
v the size of the borrower's monthly payment.
• An increase in the loan's interest rate will
v the size of the borrower's monthly payment.
• An increase in the loan's term will
v the size of the borrower's monthly payment.
Transcribed Image Text:1. As all values are denominated in U.S. dollars, you do not have to enter any dollar signs.
2. Round all interest payments down to the nearest whole dollar.
3. Rounding creates a situation in which the numbers in the loan's final payment are often unequal. Notice in this problem, the ending
balance for payment 6 is -$2. Therefore, your final payment would actually be reduced by $2 to $26,903. In the real world, to
prevent over paying, you should call the lender to learn the actual amount due.
Payment Beginning Amount
Payment
Interest
Repayment of Principal
Ending Balance
1.
5
6.
-2
Total:
161,430
The total of the Interest column indicates the amount of interest expected to be paid over the life of the loan, and the sum of the Payment column
details the total paid ($161,430) to purchase your $145,750 home.
This is an amortized loan, because its payments contain:
O Only the principal that must be repaid
O Both interest and principal
O Only accrued interest
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